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Why Qutoutiao Stock Dipped Today

By Jeremy Bowman - Dec 17, 2020 at 4:47PM

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Shares of the Chinese content platform fell on a weak earnings report.

What happened

Shares of Qutoutiao ( QTT -7.69% ), the Chinese content aggregator, were sliding after the company issued a disappointing third-quarter earnings report today. The company has been struggling to recover after the state-owned China Central Television (CCTV) network accused Qutoutiao of selling suspicious ads with false information at a high-profile consumer rights show back in July.

Today, the stock finished the session down 10.4%

Chinese currency mixed with  American bills and a clear sculpture of the globe

Image source: Getty Images.

So what

Qutoutiao saw both monthly active users and daily active users fall in the quarter as the company's app was removed from several major Android app stores for two weeks in July, in the aftermath of CCTV's accusations. That led to a sharp slowdown in the business during the July through September quarter.

Revenue fell 20% to $166.4 million, which was below the lone analyst estimate at $212.5 million and was at the low end of the company's guidance. However, the company cut back aggressively on spending, including on sales and marketing, and its adjusted loss per share narrowed from $0.44 a year ago to $0.07, but was also better than the lone analyst estimate at breakeven. 

CEO Eric Siliang Tan said: "We are delighted to see the resilience of our business as reflected in the results of the third quarter. As we continue to improve the operational efficiency, we see a balanced and promising path toward growth and profitability for the coming years."

Now what

Looking ahead to the fourth quarter, management expects revenue to continue to fall, forecasting a decline of 25%-26%, showing the headwinds from the CCTV intervention won't be easily overcome. That represents a stark contrast with the Chinese company's previously strong growth rate. For now, the fate of the stock may be in the hands of the Chinese government, at least until Qutoutiao repairs its reputation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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